Government Shouldn’t Decide What Cars Run On

Nicolas Loris /
June 07, 2011

With gas prices hovering at $4 per gallon, politicians are trying to sell quick fixes that will inevitably end up hurting consumers. The latest attempt is an open fuel standard that would require a certain percentage of new vehicles to be flex-fuel (a combination of gasoline and ethanol or methanol), electric, natural gas, biofuels, or any other power source that is an alternative to your traditional internal combustion engine.

Policymakers will attempt to convince the public that open fuel standards encourage competition and will benefit consumers. Consumers won’t be paying such high prices at the pump and Americans will be buying less foreign oil. Moreover, the additional cost for each vehicle will be marginal. As opposed to promoting one technology (such as electric vehicles or natural gas vehicles), an open fuel standard does not pick winners or losers.

It all sounds great. So why do we need a mandate for vehicle producers to make 50 percent of their fleet to run on these technologies? The reason there are not more cars running on batteries, natural gas, methane, or other alternative fuels is the result of competition, not the absence of it.

This isn’t the first attempt to mandate alternative vehicle fuel use. Policymakers in the past have proposed to have vehicle manufacturers make a certain percentage of their fleet flex-fuel. What the Competitive Enterprise Institute’s Marlo Lewis writes about that idea applies to a broader alternative vehicle mandate as well:

What flex-fuel mandatists lament as a lack of competition is simply a competitive outcome they dislike. Mandatists do not want competition. They want a rigged marketplace in which they, rather than competition, dictate the outcomes.

There are plenty of technologies already developed to promote competition, and the one that emerges to provide a consistently affordable alternative to gasoline won’t need the help of the government, because the profits will be enough incentive to drive production and lower costs, which will be enough incentive for the consumer to switch from a car that runs on gasoline to something that is cheaper. It may not happen as fast as politicians and lobbyists representing the beneficiaries of open fuel standards would like, but then again, it might. Good economic ideas can expand at rapid rates. Getting the government involved only impedes the process.

Having an open fuel standard also means one of two things for domestic vehicle manufacturers. They’re going to be producing a lot of cars no one wants to buy or they’re going to receive more taxpayer dollars for the production and consumption of these vehicles. The government already manipulates the automobile market with fuel efficiency standards. Do we really need more government intervention?